Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

INSIDE RUSSIA: Agro Credits Help All the Wrong People




This past week Gennady Kulik, deputy prime minister responsible for agriculture, cheered farmers with the news that Sberbank will extend a 7 billion ruble credit ($350 million) to the leasing fund. And the fund f or, more precisely, the company Rosagrosnab, which is close to the deputy prime minister f will in turn lease agricultural equipment to the completely-ruined Russian farmer at favorable rates.


The farmers genuinely need equipment: In 1998, they bought only 6,500 tractors while needing, according to the agrarian lobby, 627,000 tractors. But details of the plan for rescuing agriculture are truly surprising.


Kulik says the leasing fund is needed because the low domestic prices for grain mean farmers cannot afford equipment. True, grain prices jumped dramatically this year because of the bad harvest. Afterward, Kulik hastily reached an agreement with the United States and the European Union that the West will foist its excess grain on us, once and for all ruining Russia's farmers while saving a market it would have otherwise lost.


The idea of a wealthy peasantry apparently stings Russia's agrarian lobbyists. Wealthy peasants would be able to buy tractors on their own. Buying a tractor independently means spending money in the market, while leasing one from a state company involves the redistribution of money by a state bureaucrat. Indeed, some even say that credits from the leasing fund go to those who offer the bureaucrats the most f say, 30 percent to 50 percent of the credit f and who have no intention of paying the credit back.


What is more, it is a mystery where Sberbank is getting the money for the leasing fund. According to the Audit Chamber's information (which is limited, given that its auditors were literally not allowed through Sberbank's doors), Sberbank is in bad shape. In 1998, it lost 3.5 billion rubles ($700 million according to the pre-August exchange rates) in nine months from operations with securities. These losses were caused not only by last August's default but also by the ineffectiveness of other operations. In 1997, for example, Sberbank lost money on corporate securities at a time when Russia's market was growing rapidly.


In a normal country, such balance sheets would be enough to stop a bank from giving out credits. Yet Sberbank President Andrei Kazmin agrees to give the agricultural credit in order to avoid having to heed the communist auditors' demands that he open up his books. Central Bank chief Viktor Gerashchenko is forced to reach an agreement with the agro-lobbyists or face an investigation into FIMACO f even though the deal essentially means money will be printed by Central Bank, transferred to Sberbank, given out as credits and not returned.


Kulik spoke about a credit to the leasing fund after returning from America, where he had signed a framework agreement with John Deere in which the giant agricultural equipment producer will lease equipment to Russia for $1 billion. It looks like that deal, which Russian producers are already characterizing as "lethal for Russian industry," will be financed from the federal budget.


In a word, neither the events in the Balkans nor solidarity with his party comrades prevents Gennady Kulik, guardian of the Russian peasantry, from looking after the interests of American farms and machine builders.